Growth in Chinese demand for copper in 2016 was likely to be hit by a new directive from regulators that could replace predominant copper with cheaper aluminum for making alloy cable, Goldman Sachs said on Monday. China accounts for half of global copper demand, estimated at about 22-23 million tonnes this year. Around half of Chinese demand growth next year could be lost due to the new standards, regulating the use of low-voltage aluminum alloy-cables, introduced by the country's National Energy Administration, the bank said.
Consumers had been using copper for low voltage power cables, used primarily to connect buildings to substations, Goldman said, adding that due to the new standards, they would now switch to aluminium alloys since the price of copper was 3.4 times that of aluminum in China. "This news adds further downside risks to our China demand growth assumption of 4 percent for 2016." London copper edged up on Monday after sliding 5 percent last month, but remained under pressure with data stoking worries about demand in China.
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